Study: Customers Really Do Trust Family Businesses More

When Gilbane, a family-owned construction company, hired a design firm for a rebranding, the designers surveyed Gilbane’s clients and came back with an important finding: Do not discount the fact that the firm is a “family-owned” business.

“They advised us to retain that as a strong part of who we are,” said Paul Choquette, a fifth-generation Gilbane who runs the Mid-Atlantic operation. “There’s a feel to a family business that clients in our space like. They know we won’t make any radical changes in our business – such as growing too quickly or selling off entire divisions – that might negatively impact the attention they get from us on their projects.”

High-rise buildings and schools are among Gilbane’s typical projects. It also designed the Air and Space Museum in Washington.

Employees in the construction space tend to prefer “family-owned” as well. Two decades ago, when Fluor Corporation – the global, publicly-traded construction firm – acquired ADP Marshall, a family-owned construction company, 40 top-level ADP employees decided they wanted to remain working at a family company and voluntarily flocked to Gilbane, whose website reads: “A Family of Companies since 1873.”

Gilbane’s experience jibes with a recent EY’s research report, “Staying Power: How Do Family Businesses Create Lasting Success.” The report, conducted together with Kennesaw State University’s Cox Family Enterprise Center, surveyed the 25 largest family businesses in each of the 21 top global markets. The companies surveyed had average sales of $3.48 billion, operated in an average of 15 countries, and had an average of 12,000 employees.

The study revealed several keys to family-business success, including preparing the younger generations for succession; considering women for the CEO’s office; budgeting for spending increases on cybersecurity; and shoring up relationships among family members through philanthropic activities and family-business branding.

Indeed, family-business branding builds trust: Seventy-six percent of companies surveyed report that they refer to themselves as a family business in their marketing materials to establish a strong identity, differentiate, and build trust with customers and employees. Family-business branding is on prominent display at companies such as German brewery Warsteiner: “Family Tradition Since 1753.”

Companies in developed economies, according to the report, are more likely to brand themselves as family businesses than those in emerging economies. This could be due to safety concerns, or a lack of history: Companies in younger economies generally do not yet have a storied legacy on which to draw.

Some emerging-market countries also appear to have a cultural bias leading to distrust of family businesses, according to the Edelman Trust Barometer. Still, in Edelman’s latest survey, the Barometer shows that family businesses are, overall, the most trusted of any business type worldwide, with the exception of the Asia-Pacific region.

But even for the oldest family businesses in developed economies, such as North America, whether and how to promote “family owned” in advertising, websites, social media and press releases is a more nuanced decision.

“The ‘family’ attribute has a different meaning depending on your target customer,” said Andrew Steiner, vice-president of marketing and customer operations for Ameripride, which has been supplying laundered apparel and linens to restaurants and auto shops since 1889. The person making the purchasing decisions in a B2B space, Steiner explained, is less likely to make a buy based on an emotional response. “In B2B, we’re often being compared to a competitor on a spreadsheet, based purely on price and performance,” said Steiner. “So our first goal, in marketing, is to make ourselves what we call un-spreadsheet-able.”

Ameripride is still 100% family-owned, with a board split evenly between family and independent advisers.

“We talk about family in our supporting materials but not in our tagline,” said Steiner. “Family is important to the feel of our company.”

How much the company self-identifies as a family business obviously varies. If the consumer has a say, 60% said they prefer to buy from family businesses, according to Family Business Magazine. It’s no surprise that the majority of family businesses brand with this key market differentiator.

Editor’s note: This piece was updated on April 28, 2015 at 9:04AM.

Carrie Hall is an assurance partner and the EY Americas Family Business Leader. Carrie has worked with entrepreneurial family-owned businesses for over 28 years, providing audits and advising on matters such as growth strategies, sustainability, succession and governance.

Joseph Astrachan is a professor of family business, management, and entrepreneurship at Kennesaw State University.